While home loan interest rates are low, many Australians see their home equity as a way of purchasing ‘big ticket’ items at more affordable rates. Statistically speaking, the most common items purchased are as follows:
A New Car – Car loan rates are around 7 percent. However, most home loan rates are around 5 percent. Therefore, it is much cheaper long-term to use your equity to finance the purchase of a vehicle.
Vacations – Many of us would like to travel, but saving for that special holiday can take forever. This is why many Australians are opting to use their equity and to travel now, rather than later.
Renovate – Expanding your home or putting on a new addition is a great way to use equity in your home as it typically adds value to the property.
Investment – Rather than saving the deposit needed to buy an investment property, which can take years, you can use your home equity to finance the deposit. This means that you can buy sooner and start building your wealth.
The Key to Using Your Home’s Equity
Buying a new car or a holiday? Then aim to pay off the amount you’ve borrowed over the same period as a car loan, such 3 to 5-years, or over 12 to 18-months for a holiday. This way you’re not paying a massive amount back in interest over the full-term of your loan.
Renovating? Then don’t over capitalise. To avoid this, get an estimated value of your home before and after renovations, prior to the renovations occurring. This way you can make sure you’re not overspending.
Investing? Then make sure you have enough cash flow to cover your investment’s expenses for 12-months. This way you won’t encounter financial difficulties.
Are you interested in refinancing? If so, then contact eChoice and find out how you can refinance and use your home’s equity TODAY.
Written by eChoice